CBS profit rises 20% on higher fee revenue

AmolSharma

CBS Corp. reported a 20% increase in fourth-quarter profit, thanks to higher content licensing and distribution revenue, and projected it would quadruple revenue from cable and satellite fees over the next six years.

CBS said it expects fees from cable and satellite providers to rise to $2 billion by 2020, up from $500 million last year. CBS previously had projected it would boost fees to $1 billion by 2017.

The higher projection follows last year's bitter battle with Time Warner Cable Inc. over carriage fees. CBS was widely seen as besting TWC in that fight. Analysts have said CBS won a big increase in its fees.

CBS Chief Executive Leslie Moonves said the new projection would hold up regardless of the outcome of a legal battle under way between broadcasters, including CBS, and Aereo Inc. The online video outlet streams local stations' signals over the Web for a monthly fee, without the permission of broadcasters. CBS and other broadcasters have sued for copyright infringement and the Supreme Court is scheduled to hear arguments on April 22. Aereo argues its service facilitates consumers' legal right to receive over-the-air TV broadcasts for free.

In their legal arguments broadcasters have argued that if held legal, Aereo could set a precedent that would harm their ability to collect carriage revenue for stations.

Mr. Moonves said on an earnings conference call that CBS is confident of victory in the Supreme Court. He also said the company has a "host of compelling business alternatives" if Aereo wins. Those could include CBS launching its own streaming offering or ceasing over-the-air broadcasts and delivering its programming like a cable TV network.

CBS posted a profit of $470 million, or 76 cents a share, up from $393 million, or 60 cents a share, a year earlier. Revenue rose 5.8% to $3.91 billion. Investors cheered the news, sending shares 4% higher in after-hours trading Wednesday. Meanwhile CBS said it would speed up an existing stock-buyback program, repurchasing $2 billion of stock in the current quarter.

CBS generates more than half of its top line from advertising, but in recent years it has made a concerted effort to boost revenue from non-advertising sources such as international programming sales, domestic reruns and digital distribution deals. Content licensing and distribution revenue grew 28% in the fourth quarter, while subscription and affiliate fees--including those from TV station carriage--grew 7.3%.

CBS has been actively licensing its content to online streaming services like Netflix. Earlier this week, it announced a deal to make many episodes in its library available via Hulu. The company struck streaming deals with Amazon.com Inc. that helped finance shows and extended its library deal with the company into 2016.

"We are just beginning to find a whole set of ways to monetize our programming," Mr. Moonves said. "There is a lot more to come in this regard."

Mr. Moonves pointed to the CBS network's NFL programming as a top attraction for TV viewers. The broadcaster recently won the rights to telecast several Thursday night games in the coming season. "We're thrilled to have it," he said. "The competition was fierce." He said CBS hopes to extend the deal for a longer period.

Advertising revenue at CBS slid 0.5% to $2.4 billion. Local ad revenues declined compared with the previous year, when the U.S. presidential election generated a boost in advertising.

The latest results come as CBS is poised to complete in the current quarter the initial public offering of its CBS Outdoor Americas Inc., which sells ad space on billboards and bus panels and in malls and subway stations. The transaction will move the broadcaster closer to its target of receiving 50% of its revenue from non-advertising sources, Mr. Moonves said.

CBS said it planned to accelerate share repurchases of Class B stock by $1.5 billion, bringing the total stock that the company expects to buy back in the first quarter to $2 billion.

Write to Amol Sharma at amol.sharma@wsj.com and John Kell at john.kell@wsj.com

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